Freeport-McMoRan Reports Second-Quarter and Six-Month 2017 Results
Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to common stock totaled $268 million, $0.18 per share, for second-quarter 2017. After adjusting for net gains of $27 million, $0.01 per share, second-quarter 2017 adjusted net income attributable to common stock totaled $241 million, $0.17 per share.
- Consolidated sales totaled 942 million pounds of copper, 432 thousand ounces of gold and 25 million pounds of molybdenum for second-quarter 2017.
- Consolidated sales for the year 2017 are expected to approximate 3.7 billion pounds of copper, 1.6 million ounces of gold and 93 million pounds of molybdenum, including 940 million pounds of copper, 375 thousand ounces of gold and 22 million pounds of molybdenum for third-quarter 2017.
- Average realized prices were $2.65 per pound for copper, $1,243 per ounce for gold and $9.58 per pound for molybdenum for second-quarter 2017.
- Average unit net cash costs were $1.20 per pound of copper for second-quarter 2017 and are expected to average $1.19 per pound of copper for the year 2017.
- Operating cash flows totaled $1.0 billion (including $144 million in working capital sources and changes in tax payments) for second-quarter 2017 and $1.8 billion (including $322 million in working capital sources and changes in tax payments) for the first six months of 2017. Based on current sales volume and cost estimates, and assuming average prices of $2.65 per pound for copper, $1,250 per ounce for gold and $7.50 per pound for molybdenum for the second half of 2017, operating cash flows for the year 2017 are expected to approximate $3.8 billion (including $0.6 billion in working capital sources and changes in tax payments).
- Capital expenditures totaled $362 million (including approximately $210 million for major mining projects) for second-quarter 2017 and $706 million for the first six months of 2017 (including approximately $420 million for major mining projects). Capital expenditures for the year 2017 are expected to approximate $1.6 billion, including $0.7 billion for underground development activities in the Grasberg minerals district in Indonesia, which depends on a resolution of PT Freeport Indonesia's (PT-FI) long-term operating rights.
- At June 30, 2017, consolidated cash totaled $4.7 billion and consolidated debt totaled $15.4 billion, compared with $4.2 billion of consolidated cash and $16.0 billion of consolidated debt at December 31, 2016. FCX had no borrowings and $3.5 billion available under its revolving credit facility at June 30, 2017.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income attributable to common stock of $268 million ($0.18 per share) for second-quarter 2017 and $496 million ($0.34 per share) for the first six months of 2017, compared with net losses attributable to common stock of $479 million ($0.38 per share) for second-quarter 2016 and $4.7 billion ($3.70 per share) for the first six months of 2016. After adjusting for net gains (losses) of $27 million ($0.01 per share) for second-quarter 2017 and $(452) million ($(0.36) per share) for second-quarter 2016, adjusted net income (loss) attributable to common stock totaled $241 million ($0.17 per share) for second-quarter 2017 and $(27) million ($(0.02) per share) for second-quarter 2016. Additionally, FCX's second-quarter 2017 sales from its mining operations to affiliated smelters resulted in the deferral of $51 million ($0.04 per share) of net income attributable to common stock, which will be recognized in future periods. Refer to the supplemental schedules, "Adjusted Net Income (Loss)," beginning on page VII, and "Deferred Profits," on page X, which are available on FCX's website, "fcx.com," for additional information.
Richard C. Adkerson, President and Chief Executive Officer, said, "We are successfully executing our strategy of building values in our large-scale, industry-leading portfolio of copper assets. Our strong management of costs and ongoing capital discipline combined with improved copper prices are providing free cash flow to strengthen our company’s financial position. We remain focused on protecting our past investments and supporting our long-term investment plans at the high-grade, long-lived mineral deposits in the Grasberg minerals district in Papua, Indonesia. We are encouraged by recent progress in our active negotiations with the Indonesian government to resolve issues involving our contractual rights and by multiple opportunities to build long-term future values for our shareholders from our high-quality copper assets in the Americas."
SUMMARY FINANCIAL DATA
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||||||
| Revenuesa,b | $ | 3,711 | $ | 3,334 | $ | 7,052 | $ | 6,576 | ||||||||||||
| Operating income (loss)a | $ | 669 | $ | 18 | $ | 1,249 | $ | (3,854 | ) | |||||||||||
| Net income (loss) from continuing operations | $ | 326 | $ | (229 | ) | $ | 594 | $ | (4,326 | ) | ||||||||||
| Net income (loss) from discontinued operations | $ | 9 | c | $ | (181 | ) | $ | 47 | c | $ | (185 | ) | ||||||||
| Net income (loss) attributable to common stockd,e | $ | 268 | $ | (479 | ) | $ | 496 | $ | (4,663 | ) | ||||||||||
| Diluted net income (loss) per share of common stock: | ||||||||||||||||||||
| Continuing operations | $ | 0.18 | $ | (0.23 | ) | $ | 0.31 | $ | (3.54 | ) | ||||||||||
| Discontinued operations | — | (0.15 | ) | 0.03 | (0.16 | ) | ||||||||||||||
| $ | 0.18 | $ | (0.38 | ) | $ | 0.34 | $ | (3.70 | ) | |||||||||||
| Diluted weighted-average common shares outstanding | 1,453 | 1,269 | 1,453 | 1,260 | ||||||||||||||||
| Operating cash flowsf | $ | 1,037 | $ | 874 | $ | 1,829 | $ | 1,614 | ||||||||||||
| Capital expenditures | $ | 362 | $ | 833 | $ | 706 | $ | 1,815 | ||||||||||||
| At June 30: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 4,667 | $ | 330 | $ | 4,667 | $ | 330 | ||||||||||||
| Total debt, including current portion | $ | 15,354 | $ | 19,220 | $ | 15,354 | $ | 19,220 | ||||||||||||
| a. For segment financial results, refer to the supplemental schedules, "Business Segments," beginning on page X, which are available on FCX's website, "fcx.com." | ||||||||||||||||||||
| b. Includes (unfavorable) favorable adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $(20) million ($(8) million to net income attributable to common stock or $(0.01) per share) in second-quarter 2017, $(28) million ($(15) million to net loss attributable to common stock or $(0.01) per share) in second-quarter 2016, $81 million ($35 million to net income attributable to common stock or $0.02 per share) for the first six months of 2017 and $5 million ($2 million to net loss attributable to common stock or less than $0.01 per share) for the first six months of 2016. For further discussion, refer to the supplemental schedule, "Derivative Instruments," on page X, which is available on FCX's website, "fcx.com." | ||||||||||||||||||||
| c. Primarily reflects adjustments to the fair value of the potential $120 million in contingent consideration related to the November 2016 sale of FCX's interest in TF Holdings Limited (TFHL), which totaled $55 million at June 30, 2017, and in accordance with accounting guidelines, will continue to be adjusted through December 31, 2019. | ||||||||||||||||||||
| d. Includes net gains (charges) of $27 million ($0.01 per share) in second-quarter 2017, $(452) million ($(0.36) per share) in second-quarter 2016, $34 million ($0.02 per share) for the first six months of 2017 and $(4.4) billion ($(3.53) per share) for the first six months of 2016 that are described in the supplemental schedule, "Adjusted Net Income (Loss)," beginning on page VII, which is available on FCX's website, "fcx.com." | ||||||||||||||||||||
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| e. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. For a summary of net impacts from changes in these deferrals, refer to the supplemental schedule, "Deferred Profits," on page X, which is available on FCX's website, "fcx.com." | ||||||||||||||||||||
| f. Includes net working capital sources and changes in tax payments of $144 million in second-quarter 2017, $278 million in second-quarter 2016, $322 million for the first six months of 2017 and $466 million for the first six months of 2016. | ||||||||||||||||||||
SUMMARY OPERATING DATA
| Three Months Ended | Six Months Ended | ||||||||||||||
| 2017 | 2016a | 2017 | 2016a | ||||||||||||
| Copper (millions of recoverable pounds) | |||||||||||||||
| Production | 883 | 1,011 | 1,734 | 1,998 | |||||||||||
| Sales, excluding purchases | 942 | 987 | 1,751 | 1,987 | |||||||||||
| Average realized price per pound | $ | 2.65 | $ | 2.19 | $ | 2.65 | $ | 2.17 | |||||||
| Site production and delivery costs per poundb | $ | 1.64 | $ | 1.41 | $ | 1.62 | $ | 1.45 | |||||||
| Unit net cash costs per poundb | $ | 1.20 | $ | 1.33 | $ | 1.29 | $ | 1.36 | |||||||
| Gold (thousands of recoverable ounces) | |||||||||||||||
| Production | 353 | 166 | 592 | 350 | |||||||||||
| Sales, excluding purchases | 432 | 156 | 614 | 357 | |||||||||||
| Average realized price per ounce | $ | 1,243 | $ | 1,292 | $ | 1,242 | $ | 1,259 | |||||||
| Molybdenum (millions of recoverable pounds) | |||||||||||||||
| Production | 23 | 19 | 46 | 39 | |||||||||||
| Sales, excluding purchases | 25 | 19 | 49 | 36 | |||||||||||
| Average realized price per pound | $ | 9.58 | $ | 8.34 | $ | 9.16 | $ | 7.99 | |||||||
| a. Excludes the results of the Tenke Fungurume (Tenke) mine, which was sold in November 2016 and is reported as discontinued operations. Copper sales from the Tenke mine totaled 124 million pounds in second-quarter 2016 and 247 million for the first six months of 2016. | |||||||||||||||
| b. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com." | |||||||||||||||
Consolidated Sales Volumes
Second-quarter 2017 copper sales of 942 million pounds were lower than the April 2017 estimate of 975 million pounds, primarily reflecting the impact of worker absenteeism on mining and milling rates in Indonesia. Second-quarter 2017 copper sales were also lower than second-quarter 2016 sales of 987 million pounds, primarily reflecting anticipated lower ore grades in North America and lower leach production and recoveries in South America, partly offset by higher volumes from Indonesia associated with higher ore grades and the sale of concentrate in inventory produced in first-quarter 2017.
Second-quarter 2017 gold sales of 432 thousand ounces were slightly lower than the April 2017 estimate of 440 thousand ounces, but were higher than second-quarter 2016 sales of 156 thousand ounces, primarily reflecting higher ore grades from Indonesia.
Second-quarter 2017 molybdenum sales of 25 million pounds were slightly higher than the April 2017 estimate of 24 million pounds and were higher than second-quarter 2016 sales of 19 million pounds.
Sales volumes for the year 2017 are expected to approximate 3.7 billion pounds of copper, 1.6 million ounces of gold and 93 million pounds of molybdenum, including 940 million pounds of copper, 375 thousand ounces of gold and 22 million pounds of molybdenum in third-quarter 2017. Estimated sales volumes for the year 2017 are lower than April 2017 estimates by approximately 150 million pounds of copper and 320 thousand ounces of gold, principally attributable to lower mining rates in the Grasberg open pit associated with reduced manpower levels and modifications to the ramp-up schedule for the Deep Mill Level Zone (DMLZ) underground mine. These shortfalls are expected to be recovered in future periods. Efforts are under way to increase mining rates in the Grasberg open pit to benefit from the high-grade ore currently available to be mined. Refer to page 6 for a discussion of Indonesia Regulatory Matters, which may have a significant impact on future results.
Consolidated Unit Costs
Consolidated average unit net cash costs (net of by-product credits) for FCX's copper mines of $1.20 per pound of copper in second-quarter 2017 were lower than unit net cash costs of $1.33 per pound in second-quarter 2016, primarily reflecting higher by-product credits, partly offset by lower copper sales volumes.
Assuming average prices of $1,250 per ounce of gold and $7.50 per pound of molybdenum for the second half of 2017 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for copper mines are expected to average $1.19 per pound of copper for the year 2017. The impact of price changes for the second half of 2017 on consolidated unit net cash costs would approximate $0.015 per pound for each $50 per ounce change in the average price of gold and $0.01 per pound for each $2 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit copper mines in North America - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, molybdenum concentrate, gold and silver are also produced by certain of FCX's North America copper mines.
All of the North America mining operations are wholly owned, except for Morenci. FCX records its 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method.
Operating and Development Activities. FCX has significant undeveloped reserves and resources in North America and a portfolio of potential long-term development projects. Future investments will be undertaken based on the results of economic and technical feasibility studies, and are dependent on market conditions. FCX continues to evaluate opportunities to reduce the capital intensity of its long-term development projects.
Through exploration drilling, FCX has identified a significant resource at the Lone Star project located near the Safford operation in eastern Arizona. Initial production from the Lone Star oxide ores could begin in 2021 using existing infrastructure to replace oxide production from Safford. FCX is seeking regulatory approvals for this project and continues to evaluate longer term opportunities available from the significant sulfide potential in the Lone Star/Safford minerals district.
Operating Data. Following is summary consolidated operating data for the North America copper mines for the second quarters and first six months of 2017 and 2016:
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
| Production | 384 | 469 | 776 | 956 | ||||||||||||
| Sales, excluding purchases | 408 | 464 | 783 | 967 | ||||||||||||
| Average realized price per pound | $ | 2.62 | $ | 2.18 | $ | 2.65 | $ | 2.17 | ||||||||
| Molybdenum (millions of recoverable pounds) | ||||||||||||||||
| Productiona | 8 | 8 | 17 | 16 | ||||||||||||
| Unit net cash costs per pound of copperb | ||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.59 | $ | 1.40 | $ | 1.56 | $ | 1.40 | ||||||||
| By-product credits | (0.16 | ) | (0.11 | ) | (0.15 | ) | (0.10 | ) | ||||||||
| Treatment charges | 0.10 | 0.11 | 0.10 | 0.11 | ||||||||||||
| Unit net cash costs | $ | 1.53 | $ | 1.40 | $ | 1.51 | $ | 1.41 | ||||||||
| a. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at the North America copper mines. | ||||||||||||||||
| b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com." | ||||||||||||||||
North America's consolidated copper sales volumes of 408 million pounds in second-quarter 2017 were lower than second-quarter 2016 sales of 464 million pounds, primarily reflecting lower ore grades. North America copper sales are estimated to approximate 1.5 billion pounds for the year 2017, compared with 1.8 billion pounds in 2016.
Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.53 per pound of copper in second-quarter 2017 were higher than unit net cash costs of $1.40 per pound in second-quarter 2016, primarily reflecting lower sales volumes, partly offset by higher by-product credits.
Average unit net cash costs (net of by-product credits) for the North America copper mines are expected to approximate $1.54 per pound of copper for the year 2017, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $7.50 per pound for the second half of 2017. North America's average unit net cash costs for the year 2017 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum.
South America Mining. FCX operates two copper mines in South America - Cerro Verde in Peru (in which FCX owns a 53.56 percent interest) and El Abra in Chile (in which FCX owns a 51 percent interest). These operations are consolidated in FCX's financial statements. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.
Operating and Development Activities. The Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016. Cerro Verde's expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The project expanded the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day.
In the second half of 2015, FCX adjusted operations at its El Abra mine to reduce mining and stacking rates by approximately 50 percent to achieve lower operating and labor costs, defer capital expenditures and extend the life of the existing operations. El Abra continues to operate at reduced rates.
FCX continues to evaluate a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate a significant sulfide resource, which could potentially support a major mill project. Future investments will depend on technical studies, economic factors and market conditions.
Operating Data. Following is summary consolidated operating data for the South America mining operations for the second quarters and first six months of 2017 and 2016:
| Three Months Ended | Six Months Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||
| Production | 300 | 334 | 604 | 669 | ||||||||||||
| Sales | 287 | 327 | 596 | 650 | ||||||||||||
| Average realized price per pound | $ | 2.67 | $ | 2.19 | $ | 2.65 | $ | 2.18 | ||||||||
| Molybdenum (millions of recoverable pounds) | ||||||||||||||||
| Productiona | 7 | 4 | 13 | 9 | ||||||||||||
| Unit net cash costs per pound of copperb | ||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.55 | $ | 1.20 | $ | 1.52 | $ | 1.22 | ||||||||
| By-product credits | (0.13 | ) | (0.12 | ) | (0.16 | ) | (0.10 | ) | ||||||||
| Treatment charges | 0.22 | 0.23 | 0.22 | 0.23 | ||||||||||||
| Royalty on metals | 0.01 | — | 0.01 | 0.01 | ||||||||||||
| Unit net cash costs | $ | 1.65 | $ | 1.31 | $ | 1.59 | $ | 1.36 | ||||||||
| a. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at Cerro Verde. | ||||||||||||||||
| b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com."
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South America's consolidated copper sales volumes of 287 million pounds in second-quarter 2017 were lower than second-quarter 2016 sales of 327 million pounds primarily reflecting lower mining rates, ore grades and recoveries. Sales from South America mining are expected to approximate 1.2 billion pounds of copper for the year 2017, compared with 1.3 billion pounds of copper in 2016.
Average unit net cash costs (net of by-product credits) for South America mining of $1.65 per pound of copper in second-quarter 2017 were higher than unit net cash costs of $1.31 per pound in second-quarter 2016, primarily reflecting lower sales volumes and higher maintenance costs. Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $1.65 per pound of copper for the year 2017, based on current sales volume and cost estimates and assuming an average price of $7.50 per pound of molybdenum for the second half of 2017.
Indonesia Mining. Through its 90.64 percent owned and consolidated subsidiary PT-FI, FCX's assets include one of the world's largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT-FI operates a proportionately consolidated joint venture, which produces copper concentrate that contains significant quantities of gold and silver.
Regulatory Matters. In January and February 2017, the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI's Contract of Work (COW), which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year time frame, subject to approval of the extension of its long-term operating rights.
In mid-February 2017, pursuant to the COW's dispute resolution provisions, PTFI provided formal notice to the Indonesian government of an impending dispute listing the government's breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.
As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI has taken actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a Memorandum of Understanding with the Indonesian government confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.
On April 21, 2017, the Indonesian government issued a permit to PT-FI that allows exports to resume for a six-month period, and PT-FI commenced export shipments.
PT-FI and the Indonesian government are now engaged in active negotiations on the conversion of PT-FI's COW to an IUPK accompanied by an investment stability agreement with the objective of providing a mutually acceptable long-term investment framework. In addition to negotiating a stability agreement, the parties are also discussing requirements for the construction of a new smelter and the government's request for divestment.
PT-FI and the Indonesian government are working cooperatively with the objective of reaching a mutually acceptable long-term resolution during 2017 to secure PT-FI's long-term investments for the benefit of all stakeholders.
Operating and Development Activities. PT-FI is currently mining the final phase of the Grasberg open pit, which contains high copper and gold ore grades. PT-FI expects to mine high-grade ore over the next several quarters prior to transitioning to the Grasberg Block Cave underground mine in early 2019.
PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to produce large-scale quantities of copper and gold following the transition from the Grasberg open pit. As a result of regulatory uncertainty, PT-FI has slowed investments in its underground development projects in 2017. Assuming an agreement is reached to support PT-FI's long-term investment plans, estimated annual capital spending on these projects would average $1.0 billion per year ($0.8 billion per year net to PT-FI) over the next five years. Considering the long-term nature and size of these projects, actual costs could vary from these estimates. In response to market conditions and Indonesian regulatory uncertainty, timing of these expenditures continues to be reviewed. If PT-FI is unable to reach agreement with the Indonesian government on its long-term mining rights, FCX intends to reduce or defer investments significantly in its underground development projects and pursue arbitration under its COW.
Operating Data. Following is summary consolidated operating data for the Indonesia mining operations for the second quarters and first six months of 2017 and 2016:
| Three Months Ended | Six Months Ended | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Copper (millions of recoverable pounds) | ||||||||||||||||||
| Production | 199 | 208 | 354 | 373 | ||||||||||||||
| Sales | 247 | 196 | 372 | 370 | ||||||||||||||
| Average realized price per pound | $ | 2.67 | $ | 2.20 | $ | 2.64 | $ | 2.17 | ||||||||||
| Gold (thousands of recoverable ounces) | ||||||||||||||||||
| Production | 348 | 158 | 580 | 336 | ||||||||||||||
| Sales | 427 | 151 | 604 | 346 | ||||||||||||||
| Average realized price per ounce | $ | 1,243 | $ | 1,292 | $ | 1,242 | $ | 1,260 | ||||||||||
| Unit net cash costs per pound of coppera | ||||||||||||||||||
| Site production and delivery, excluding adjustments | $ | 1.80 | b | $ | 1.77 | $ | 1.91 | b | $ | 1.99 | ||||||||
| Gold and silver credits | (2.21 | ) | (1.05 | ) | (2.10 | ) | (1.27 | ) | ||||||||||
| Treatment charges | 0.26 | 0.29 | 0.27 | 0.30 | ||||||||||||||
| Export duties | 0.11 | 0.08 | 0.11 | 0.08 | ||||||||||||||
| Royalty on metals | 0.17 | 0.11 | 0.17 | 0.12 | ||||||||||||||
| Unit net cash costs | $ | 0.13 | $ | 1.20 | $ | 0.36 | $ | 1.22 | ||||||||||
| a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com." | ||||||||||||||||||
| b. Excludes fixed costs charged directly to production and delivery costs totaling $82 million ($0.33 per pound of copper) for second-quarter 2017 and $103 million ($0.28 per pound of copper) for the first six months of 2017 associated with workforce reductions. | ||||||||||||||||||
Beginning in mid-April 2017, PT-FI experienced a high level of worker absenteeism, which has unfavorably impacted mining and milling rates. During May 2017, a significant number of employees and contractors participated in an illegal strike and did not respond to PT-FI's multiple summons to return to work. As a result, these workers were deemed to have voluntarily resigned pursuant to Indonesian laws and regulations. During second-quarter 2017, PT-FI took steps to mitigate the impacts of worker absenteeism, including producing from available mine and mill stockpiles and selling concentrate in inventory produced in first-quarter 2017. PT-FI is also taking steps to increase its workforce in order to restore normal operating rates.
In June 2017, production from the DMLZ underground mine, which is currently being developed, was impacted by mining-induced seismic activity. Mining-induced seismic activity is not uncommon in block cave mining. To mitigate the impact of these events, PT-FI has adjusted the DMLZ mine plans while it evaluates the appropriate start-up schedule. PT-FI expects DMLZ to ramp up to full capacity of 80,000 metric tons of ore per day in 2021, but at a slower pace than previous estimates.
PT-FI is also evaluating opportunities to mine a section of high-grade ore from the Grasberg open pit in 2018 and 2019 currently planned to be mined in future periods from the Grasberg Block Cave underground mine. These plans are expected to be evaluated through the remainder of 2017.
Indonesia's consolidated sales of 247 million pounds of copper and 427 thousand ounces of gold in second-quarter 2017 were higher than second-quarter 2016 sales of 196 million pounds of copper and 151 thousand ounces of gold, primarily reflecting the sale of concentrate in inventory and higher ore grades, partly offset by lower mill rates.
Assuming achieving planned operating rates for the second half of 2017, consolidated sales volumes from Indonesia mining are expected to approximate 1.0 billion pounds of copper and 1.6 million ounces of gold for the year 2017, compared with 1.1 billion pounds of copper and 1.1 million ounces of gold for the year 2016.
A significant portion of PT-FI's costs are fixed and unit costs vary depending on production volumes and other factors. Indonesia's unit net cash costs (including gold and silver credits) of $0.13 per pound of copper in second-quarter 2017 were lower than unit net cash costs of $1.20 per pound in second-quarter 2016, primarily reflecting higher gold and silver credits.
Assuming an average gold price of $1,250 per ounce for the second half of 2017 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.13 per pound of copper for the year 2017. Indonesia mining's unit net cash credits for the year 2017 would change by approximately $0.05 per pound for each $50 per ounce change in the average price of gold. Because of the fixed nature of a large portion of Indonesia's costs, unit costs vary from quarter to quarter depending on copper and gold volumes.
Indonesia mining's projected sales volumes are dependent on a number of factors, including operational performance, workforce productivity, the timing of shipments and its ability to continue to export copper concentrate.
Molybdenum Mines. FCX has two wholly owned molybdenum mines in North America - the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of molybdenum concentrate produced at the Henderson and Climax mines, as well as from FCX's North America and South America copper mines, is processed at FCX's conversion facilities.
Operating and Development Activities. In response to market conditions, the Henderson molybdenum mine continues to operate at reduced rates. Production from the Molybdenum mines totaled 8 million pounds of molybdenum in second-quarter 2017 and 7 million pounds in second-quarter 2016. Refer to summary operating data on page 3 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at the Molybdenum mines, and from FCX's North America and South America copper mines.
Average unit net cash costs for the Molybdenum mines of $7.81 per pound of molybdenum in second-quarter 2017 approximated second-quarter 2016 costs. Based on current sales volume and cost estimates, unit net cash costs for the Molybdenum mines are expected to average approximately $7.85 per pound of molybdenum for the year 2017.
For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XIII, which are available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration activities are generally associated with its existing mines, focusing on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending continues to be constrained by market conditions and is expected to approximate $70 million for the year 2017, compared to $44 million in 2016.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.0 billion (including $144 million in working capital sources and changes in tax payments) in second-quarter 2017 and $1.8 billion (including $322 million in working capital sources and changes in tax payments) for the first six months of 2017.
Based on current sales volume and cost estimates, and assuming average prices of $2.65 per pound of copper, $1,250 per ounce of gold and $7.50 per pound of molybdenum for the second half of 2017, FCX's consolidated operating cash flows are estimated to approximate $3.8 billion for the year 2017 (including $0.6 billion in working capital sources and tax payments). The impact of price changes during the second half of 2017 on operating cash flows would approximate $180 million for each $0.10 per pound change in the average price of copper, $40 million for each $50 per ounce change in the average price of gold and $40 million for each $2 per pound change in the average price of molybdenum. Refer to page 6 for discussion of Indonesian Regulatory Matters, which may have a significant impact on future results.
Capital Expenditures. Capital expenditures totaled $362 million for second-quarter 2017 (including approximately $210 million for major mining projects) and $706 million for the first six months of 2017 (including approximately $420 million for major mining projects). Capital expenditures are expected to approximate $1.6 billion for the year 2017, including $0.9 billion for major mining projects, primarily for underground development activities at Grasberg.
As a result of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach an agreement with the Indonesian government on its long-term mining rights, FCX intends to reduce or defer investments significantly in underground development projects and pursue arbitration under its COW.
Cash. Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests' share, taxes and other costs at June 30, 2017 (in billions):
| Cash at domestic companies | $ | 3.8 | |||
| Cash at international operations | 0.9 | ||||
| Total consolidated cash and cash equivalents | 4.7 | ||||
| Noncontrolling interests' share | (0.2 | ) | |||
| Cash, net of noncontrolling interests' share | 4.5 | ||||
| Withholding taxes and other | (0.1 | ) | |||
| Net cash available | $ | 4.4 | |||
Debt. Following is a summary of total debt and the related weighted-average interest rates at June 30, 2017 (in billions, except percentages):
| Weighted- | |||||||
| Average | |||||||
| Interest Rate | |||||||
| Senior Notes | $ | 13.9 | 4.4% | ||||
| Cerro Verde credit facility | 1.5 | 3.1% | |||||
| Total debt | $ | 15.4 | 4.3% | ||||
In June 2017, the Cerro Verde credit facility was amended to increase the commitment by $225 million to $1.5 billion, modify the amortization schedule and to extend the maturity date to June 2022. All other terms, including interest rates, remain the same.
At June 30, 2017, FCX had no borrowings, $37 million in letters of credit issued and $3.5 billion available under its revolving credit facility.
FINANCIAL POLICY
In December 2015, FCX's common stock dividend was suspended. The declaration of dividends is at the discretion of the Board of Directors (Board) and will depend upon FCX’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's second-quarter 2017 results is scheduled for today at 10:00 a.m. Eastern Time. The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the conference call live and view the slides by accessing “fcx.com.” A replay of the webcast will be available through Friday, August 25, 2017.
FCX is a leading international mining company with headquarters in Phoenix, Arizona. FCX operates large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. FCX is the world's largest publicly traded copper producer. FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world's largest copper and gold deposits; and significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America. Additional information about FCX is available on FCX's website at "fcx.com."
Cautionary Statement and Regulation G Disclosure: This press release contains forward-looking statements in which FCX discusses its potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relating to ore grades and milling rates, production and sales volumes, unit net cash costs, operating cash flows, capital expenditures, exploration efforts and results, development and production activities and costs, liquidity, tax rates, the impact of copper, gold and molybdenum price changes, the impact of deferred intercompany profits on earnings, reserve estimates, future dividend payments, and share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” "targets," “intends,” “likely,” “will,” “should,” “to be,” ”potential" and any similar expressions are intended to identify those assertions as forward-looking statements.
FCX cautions readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause FCX's actual results to differ materially from those anticipated in the forward-looking statements include supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; production rates; potential effects of cost and capital expenditure reductions and production curtailments on financial results and cash flow; potential inventory adjustments; potential impairment of long-lived mining assets; the outcome of negotiations with the Indonesian government regarding PT-FI's COW; the potential effects of violence in Indonesia generally and in the province of Papua; industry risks; regulatory changes (including adoption of financial assurance regulations as proposed by the U.S. Environmental Protection Agency under CERCLA for the hard rock mining industry); political risks; labor relations; weather- and climate-related risks; environmental risks; litigation results (including the final disposition of the unfavorable Indonesian Tax Court ruling relating to surface water taxes); and other factors described in more detail under the heading “Risk Factors” in FCX's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the U.S. Securities and Exchange Commission (SEC) as updated by FCX's subsequent filings with the SEC. With respect to FCX's operations in Indonesia, such factors include whether PT-FI will be able to resolve complex regulatory matters in Indonesia.
Investors are cautioned that many of the assumptions upon which FCX's forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which FCX cannot control, and production volumes and costs, some aspects of which FCX may not be able to control. Further, FCX may make changes to its business plans that could affect its results. FCX cautions investors that it does not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in its assumptions, changes in business plans, actual experience or other changes, and FCX undertakes no obligation to update any forward-looking statements.
This press release also contains certain financial measures such as unit net cash costs per pound of copper and molybdenum, which are not recognized under U.S. generally accepted accounting principles. As required by SEC Regulation G, reconciliations of these measures to amounts reported in FCX's consolidated financial statements are in the supplemental schedules of this press release, which are also available on FCX's website, "fcx.com."
| FREEPORT-McMoRan INC. | |||||||||||||||||
| SELECTED OPERATING DATA | |||||||||||||||||
| Three Months Ended June 30, | |||||||||||||||||
| MINING OPERATIONS: | Production | Sales | |||||||||||||||
| COPPER (millions of recoverable pounds) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (FCX's net interest in %) | |||||||||||||||||
| North America | |||||||||||||||||
| Morenci (72%)a | 187 | 224 | 196 | 221 | |||||||||||||
| Bagdad (100%) | 43 | 44 | 43 | 45 | |||||||||||||
| Safford (100%) | 37 | 53 | 42 | 52 | |||||||||||||
| Sierrita (100%) | 40 | 41 | 42 | 40 | |||||||||||||
| Miami (100%) | 5 | 6 | 5 | 7 | |||||||||||||
| Chino (100%) | 58 | 80 | 63 | 78 | |||||||||||||
| Tyrone (100%) | 14 | 19 | 17 | 19 | |||||||||||||
| Other (100%) | — | 2 | — | 2 | |||||||||||||
| Total North America | 384 | 469 | 408 | 464 | |||||||||||||
| South America | |||||||||||||||||
| Cerro Verde (53.56%) | 260 | 278 | 244 | 270 | |||||||||||||
| El Abra (51%) | 40 | 56 | 43 | 57 | |||||||||||||
| Total South America | 300 | 334 | 287 | 327 | |||||||||||||
| Indonesia | |||||||||||||||||
| Grasberg (90.64%)b | 199 | 208 | 247 | 196 | |||||||||||||
| Consolidated - continuing operations | 883 | 1,011 | 942 | c | 987 | c | |||||||||||
| Discontinued operations - Tenke Fungurume (Tenke) (56%)d | — | 122 | — | 124 | |||||||||||||
| Total | 883 | 1,133 | 942 | 1,111 | |||||||||||||
| Less noncontrolling interests | 159 | 229 | 158 | 226 | |||||||||||||
| Net | 724 | 904 | 784 | 885 | |||||||||||||
| Average realized price per pound (continuing operations) | $ | 2.65 | $ | 2.19 | |||||||||||||
| GOLD (thousands of recoverable ounces) | |||||||||||||||||
| (FCX's net interest in %) | |||||||||||||||||
| North America (100%) | 5 | 8 | 5 | 5 | |||||||||||||
| Indonesia (90.64%)b | 348 | 158 | 427 | 151 | |||||||||||||
| Consolidated | 353 | 166 | 432 | 156 | |||||||||||||
| Less noncontrolling interests | 32 | 14 | 40 | 14 | |||||||||||||
| Net | 321 | 152 | 392 | 142 | |||||||||||||
| Average realized price per ounce | $ | 1,243 | $ | 1,292 | |||||||||||||
| MOLYBDENUM (millions of recoverable pounds) | |||||||||||||||||
| (FCX's net interest in %) | |||||||||||||||||
| Henderson (100%) | 3 | 3 | N/A | N/A | |||||||||||||
| Climax (100%) | 5 | 4 | N/A | N/A | |||||||||||||
| North America copper mines (100%)a | 8 | 8 | N/A | N/A | |||||||||||||
| Cerro Verde (53.56%) | 7 | 4 | N/A | N/A | |||||||||||||
| Consolidated | 23 | 19 | 25 | 19 | |||||||||||||
| Less noncontrolling interests | 3 | 2 | 3 | 2 | |||||||||||||
| Net | 20 | 17 | 22 | 17 | |||||||||||||
| Average realized price per pound | $ | 9.58 | $ | 8.34 | |||||||||||||
| U.S. OIL AND GAS OPERATIONS: | Sales Volumes | Sales per Day | |||||||||||||||
| Oil (thousand barrels, or MBbls) | 468 | 8,654 | 5 | 95 | |||||||||||||
| Natural gas (million cubic feet or MMcf) | 4,281 | 18,795 | 47 | 207 | |||||||||||||
| Natural gas liquids (NGLs) (MBbls) | 62 | 596 | 1 | 6 | |||||||||||||
| Thousand barrels of oil equivalents (MBOE) | 1,244 | 12,382 | 14 | 136 | |||||||||||||
| a. Amounts are net of Morenci's undivided joint venture partners' interest; effective May 31, 2016, FCX's undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent. | |||||||||||||||||
| b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement. | |||||||||||||||||
| c. Consolidated sales volumes exclude purchased copper of 62 million pounds in second-quarter 2017 and 43 million pounds in second-quarter 2016. | |||||||||||||||||
| d. On November 16, 2016, FCX completed the sale of its interest in the Tenke mine. | |||||||||||||||||
| FREEPORT-McMoRan INC. | ||||||||||||||||
| SELECTED OPERATING DATA (continued) | ||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||
| MINING OPERATIONS: | Production | Sales | ||||||||||||||
| Copper (millions of recoverable pounds) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| (FCX's net interest in %) | ||||||||||||||||
| North America | ||||||||||||||||
| Morenci (72%)a | 368 | 456 | 368 | 459 | ||||||||||||
| Bagdad (100%) | 83 | 92 | 81 | 95 | ||||||||||||
| Safford (100%) | 79 | 109 | 85 | 111 | ||||||||||||
| Sierrita (100%) | 81 | 82 | 80 | 83 | ||||||||||||
| Miami (100%) | 10 | 14 | 10 | 16 | ||||||||||||
| Chino (100%) | 120 | 161 | 123 | 161 | ||||||||||||
| Tyrone (100%) | 34 | 39 | 35 | 39 | ||||||||||||
| Other (100%) | 1 | 3 | 1 | 3 | ||||||||||||
| Total North America | 776 | 956 | 783 | 967 | ||||||||||||
| South America | ||||||||||||||||
| Cerro Verde (53.56%) | 522 | 550 | 512 | 526 | ||||||||||||
| El Abra (51%) | 82 | 119 | 84 | 124 | ||||||||||||
| Total South America | 604 | 669 | 596 | 650 | ||||||||||||
| Indonesia | ||||||||||||||||
| Grasberg (90.64%)b | 354 | 373 | 372 | 370 | ||||||||||||
| Consolidated - continuing operations | 1,734 | 1,998 | 1,751 | c | 1,987 | c | ||||||||||
| Discontinued operations - Tenke (56%)d | — | 232 | — | 247 | ||||||||||||
| Total | 1,734 | 2,230 | 1,751 | 2,234 | ||||||||||||
| Less noncontrolling interests | 316 | 450 | 314 | 448 | ||||||||||||
| Net | 1,418 | 1,780 | 1,437 | 1,786 | ||||||||||||
| Average realized price per pound (continuing operations) | $ | 2.65 | $ | 2.17 | ||||||||||||
| Gold (thousands of recoverable ounces) | ||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||
| North America (100%) | 12 | 14 | 10 | 11 | ||||||||||||
| Indonesia (90.64%)b | 580 | 336 | 604 | 346 | ||||||||||||
| Consolidated | 592 | 350 | 614 | 357 | ||||||||||||
| Less noncontrolling interests | 54 | 31 | 57 | 32 | ||||||||||||
| Net | 538 | 319 | 557 | 325 | ||||||||||||
| Average realized price per ounce | $ | 1,242 | $ | 1,259 | ||||||||||||
| Molybdenum (millions of recoverable pounds) | ||||||||||||||||
| (FCX's net interest in %) | ||||||||||||||||
| Henderson (100%) | 6 | 5 | N/A | N/A | ||||||||||||
| Climax (100%) | 10 | 9 | N/A | N/A | ||||||||||||
| North America (100%)a | 17 | 16 | N/A | N/A | ||||||||||||
| Cerro Verde (53.56%) | 13 | 9 | N/A | N/A | ||||||||||||
| Consolidated | 46 | 39 | 49 | 36 | ||||||||||||
| Less noncontrolling interests | 6 | 4 | 6 | 3 | ||||||||||||
| Net | 40 | 35 | 43 | 33 | ||||||||||||
| Average realized price per pound | $ | 9.16 | $ | 7.99 | ||||||||||||
| U.S. OIL AND GAS OPERATIONS: | Sales Volumes | Sales per Day | ||||||||||||||
| Oil (MBbls) | 949 | 16,952 | 5 | 93 | ||||||||||||
| Natural gas (MMcf) | 10,280 | 38,434 | 57 | 211 | ||||||||||||
| NGLs (MBbls) | 151 | 1,170 | 1 | 6 | ||||||||||||
| MBOE | 2,814 | 24,528 | 15 | 135 | ||||||||||||
| a. Amounts are net of Morenci's undivided joint venture partners' interest; effective May 31, 2016, FCX's undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent. | ||||||||||||||||
| b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement. | ||||||||||||||||
| c. Consolidated sales volumes exclude purchased copper of 120 million pounds for the first six months of 2017 and 70 million pounds for the first six months of 2016. | ||||||||||||||||
| d. On November 16, 2016, FCX completed the sale of its interest in the Tenke mine. | ||||||||||||||||
| FREEPORT-McMoRan INC. | ||||||||||||
| SELECTED OPERATING DATA (continued) | ||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| 100% North America Copper Mines | ||||||||||||
| Solution Extraction/Electrowinning (SX/EW) Operations | ||||||||||||
| Leach ore placed in stockpiles (metric tons per day) | 688,000 | 780,700 | 694,300 | 807,100 | ||||||||
| Average copper ore grade (percent) | 0.29 | 0.33 | 0.28 | 0.32 | ||||||||
| Copper production (millions of recoverable pounds) | 282 | 303 | 559 | 605 | ||||||||
|
| ||||||||||||
| Mill Operations | ||||||||||||
| Ore milled (metric tons per day) | 299,100 | 300,400 | 301,400 | 299,500 | ||||||||
| Average ore grades (percent): | ||||||||||||
| Copper | 0.39 | 0.48 | 0.40 | 0.49 | ||||||||
| Molybdenum | 0.03 | 0.03 | 0.03 | 0.03 | ||||||||
| Copper recovery rate (percent) | 86.7 | 86.6 | 86.6 | 85.6 | ||||||||
| Production (millions of recoverable pounds): | ||||||||||||
| Copper | 174 | 219 | 360 | 445 | ||||||||
| Molybdenum | 8 | 8 | 17 | 16 | ||||||||
| 100% South America Mining | ||||||||||||
| SX/EW Operations | ||||||||||||
| Leach ore placed in stockpiles (metric tons per day) | 152,400 | 170,400 | 139,200 | 155,500 | ||||||||
| Average copper ore grade (percent) | 0.36 | 0.39 | 0.39 | 0.40 | ||||||||
| Copper production (millions of recoverable pounds) | 59 | 82 | 125 | 172 | ||||||||
| Mill Operations | ||||||||||||
| Ore milled (metric tons per day) | 347,600 | 352,000 | 343,300 | 345,700 | ||||||||
| Average ore grades (percent): | ||||||||||||
| Copper | 0.44 | 0.42 | 0.44 | 0.43 | ||||||||
| Molybdenum | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||
| Copper recovery rate (percent) | 83.0 | 88.0 | 83.8 | 87.1 | ||||||||
| Production (millions of recoverable pounds): | ||||||||||||
| Copper | 241 | 252 | 479 | 497 | ||||||||
| Molybdenum | 7 | 4 | 13 | 9 | ||||||||
| 100% Indonesia Mining | ||||||||||||
| Ore milled (metric tons per day):a | ||||||||||||
| Grasberg open pit | 88,600 | 110,200 | 71,200 | 108,000 | ||||||||
| Deep Ore Zone underground mine | 27,300 | 36,700 | 26,800 | 40,500 | ||||||||
| Deep Mill Level Zone (DMLZ) underground mineb | 3,800 | 4,900 | 3,500 | 4,500 | ||||||||
| Grasberg Block Cave underground mineb | 3,800 | 2,600 | 3,200 | 2,400 | ||||||||
| Big Gossan underground mineb | — | 1,000 | 800 | 600 | ||||||||
| Total | 123,500 | 155,400 | 105,500 | 156,000 | ||||||||
| Average ore grades: | ||||||||||||
| Copper (percent) | 1.03 | 0.84 | 1.08 | 0.77 | ||||||||
| Gold (grams per metric ton) | 1.16 | 0.48 | 1.17 | 0.50 | ||||||||
| Recovery rates (percent): | ||||||||||||
| Copper | 91.8 | 90.4 | 92.0 | 89.9 | ||||||||
| Gold | 85.3 | 80.0 | 85.1 | 80.3 | ||||||||
| Production (recoverable): | ||||||||||||
| Copper (millions of pounds) | 221 | 226 | 393 | 409 | ||||||||
| Gold (thousands of ounces) | 347 | 174 | 588 | 364 | ||||||||
| 100% Molybdenum Mines | ||||||||||||
| Ore milled (metric tons per day) | 22,000 | 18,600 | 21,800 | 18,500 | ||||||||
| Average molybdenum ore grade (percent) | 0.20 | 0.19 | 0.21 | 0.21 | ||||||||
| Molybdenum production (millions of recoverable pounds) | 8 | 7 | 16 | 14 | ||||||||
| a. Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia's (PT-FI) mill facilities from each producing mine and from development activities that result in metal production. | ||||||||||||
| b. Targeted production rates once the DMLZ underground mine reaches full capacity are expected to approximate 80,000 metric tons of ore per day in 2021; production from the Grasberg Block Cave underground mine is expected to commence in early 2019, and production from the Big Gossan underground mine is on care-and-maintenance. | ||||||||||||
| FREEPORT-McMoRan INC. | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| (In Millions, Except Per Share Amounts) | ||||||||||||||||||||
| Revenuesa | $ | 3,711 | $ | 3,334 | $ | 7,052 | $ | 6,576 | ||||||||||||
| Cost of sales: | ||||||||||||||||||||
| Production and deliveryb | 2,495 | c | 2,956 | 4,695 | c | 5,455 | ||||||||||||||
| Depreciation, depletion and amortization | 450 | 632 | 839 | 1,294 | ||||||||||||||||
| Impairment of oil and gas properties | — | 291 | — | 4,078 | ||||||||||||||||
| Total cost of sales | 2,945 | 3,879 | 5,534 | 10,827 | ||||||||||||||||
| Selling, general and administrative expensesd | 107 | c | 160 | 260 | c | 298 | ||||||||||||||
| Mining exploration and research expenses | 19 | 15 | 34 | 33 | ||||||||||||||||
| Environmental obligations and shutdown costs | (19 | ) | 11 | 8 | 21 | |||||||||||||||
| Net gain on sales of assetse | (10 | ) | (749 | ) | (33 | ) | (749 | ) | ||||||||||||
| Total costs and expenses | 3,042 | 3,316 | 5,803 | 10,430 | ||||||||||||||||
| Operating income (loss) | 669 | 18 | 1,249 | (3,854 | ) | |||||||||||||||
| Interest expense, netf | (162 | ) | (196 | ) | (329 | ) | (387 | ) | ||||||||||||
| Net (loss) gain on exchanges and early extinguishment of debt | (4 | ) | 39 | (3 | ) | 36 | ||||||||||||||
| Other income, net | 10 | 25 | 34 | 64 | ||||||||||||||||
| Income (loss) from continuing operations before income taxes and equity in affiliated companies' net (losses) earnings | 513 | (114 | ) | 951 | (4,141 | ) | ||||||||||||||
| Provision for income taxesg | (186 | ) | (116 | ) | (360 | ) | (193 | ) | ||||||||||||
| Equity in affiliated companies' net (losses) earnings | (1 | ) | 1 | 3 | 8 | |||||||||||||||
| Net income (loss) from continuing operations | 326 | (229 | ) | 594 | (4,326 | ) | ||||||||||||||
| Net income (loss) from discontinued operationsh | 9 | (181 | ) | 47 | (185 | ) | ||||||||||||||
| Net income (loss) | 335 | (410 | ) | 641 | (4,511 | ) | ||||||||||||||
| Net income attributable to noncontrolling interests: | ||||||||||||||||||||
| Continuing operations | (66 | ) | (47 | ) | (141 | ) | (109 | ) | ||||||||||||
| Discontinued operations | (1 | ) | (12 | ) | (4 | ) | (22 | ) | ||||||||||||
| Preferred dividends attributable to redeemable noncontrolling interest | — | (10 | ) | — | (21 | ) | ||||||||||||||
| Net income (loss) attributable to FCX common stocki | $ | 268 | $ | (479 | ) | $ | 496 | $ | (4,663 | ) | ||||||||||
| Basic and diluted net income (loss) per share attributable to common stock: | ||||||||||||||||||||
| Continuing operations | $ | 0.18 | $ | (0.23 | ) | $ | 0.31 | $ | (3.54 | ) | ||||||||||
| Discontinued operations | — | (0.15 | ) | 0.03 | (0.16 | ) | ||||||||||||||
| $ | 0.18 | $ | (0.38 | ) | $ | 0.34 | $ | (3.70 | ) | |||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||
| Basic | 1,447 | 1,269 | 1,447 | 1,260 | ||||||||||||||||
| Diluted | 1,453 | 1,269 | 1,453 | 1,260 | ||||||||||||||||
| a. Includes adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods, which are summarized in the supplemental schedule, "Derivative Instruments," on page X. | ||||||||||||||||||||
| b. Includes oil and gas net (credits) charges primarily associated with drillship settlements, inventory adjustments and asset impairment, which are summarized in the supplemental schedule, “Adjusted Net Income (Loss),” beginning on page VII. | ||||||||||||||||||||
| c. Includes net charges at mining operations primarily for workforce reductions at PT-FI, which are summarized in the supplemental schedule, "Adjusted Net Income (Loss)," beginning on page VII. | ||||||||||||||||||||
| d. Includes oil and gas net (credits) charges for contract termination and restructuring, which are summarized in the supplemental schedule, "Adjusted Net Income (Loss)," beginning on page VII. | ||||||||||||||||||||
| e. Refer to the supplemental schedule, "Adjusted Net Income (Loss)," beginning on page VII, for a summary of net gain on sales of assets. | ||||||||||||||||||||
| f. Consolidated interest expense, excluding capitalized interest, totaled $192 million in second-quarter 2017, $218 million in second-quarter 2016, $387 million for the first six months of 2017 and $436 million for the first six months of 2016. | ||||||||||||||||||||
| g. Refer to the supplemental schedule, "Income Taxes," on page IX for a summary of FCX's provision for income taxes. | ||||||||||||||||||||
| h. Refer to the supplemental schedule, “Adjusted Net Income (Loss),” beginning on page VII for a summary of gains (losses) on discontinued operations. | ||||||||||||||||||||
| i. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. Refer to the supplemental schedule, "Deferred Profits," on page X for a summary of net impacts from changes in these deferrals. | ||||||||||||||||||||
| FREEPORT-McMoRan INC. | |||||||||
| CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||||
| June 30, | December 31, | ||||||||
| 2017 | 2016 | ||||||||
| (In Millions) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 4,667 | $ | 4,245 | |||||
| Trade accounts receivable | 802 | 1,126 | |||||||
| Income and other tax receivables | 632 | 879 | |||||||
| Inventories: | |||||||||
| Mill and leach stockpiles | 1,359 | 1,338 | |||||||
| Materials and supplies, net | 1,264 | 1,306 | |||||||
| Product | 1,019 | 998 | |||||||
| Other current assets | 211 | 199 | |||||||
| Held for sale | 463 | 344 | |||||||
| Total current assets | 10,417 | 10,435 | |||||||
| Property, plant, equipment and mine development costs, net | 23,067 | 23,219 | |||||||
| Oil and gas properties, subject to amortization, less accumulated amortization and impairments | 48 | 74 | |||||||
| Long-term mill and leach stockpiles | 1,554 | 1,633 | |||||||
| Other assets | 1,957 | 1,956 | |||||||
| Total assets | $ | 37,043 | $ | 37,317 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued liabilities | $ | 1,880 | $ | 2,393 | |||||
| Current portion of debt | 2,216 | 1,232 | |||||||
| Current portion of environmental and asset retirement obligations | 379 | 369 | |||||||
| Accrued income taxes | 196 | 66 | |||||||
| Held for sale | 273 | 205 | |||||||
| Total current liabilities | 4,944 | 4,265 | |||||||
| Long-term debt, less current portion | 13,138 | 14,795 | |||||||
| Deferred income taxes | 3,870 | 3,768 | |||||||
| Environmental and asset retirement obligations, less current portion | 3,512 | 3,487 | |||||||
| Other liabilities | 1,586 | 1,745 | |||||||
| Total liabilities | 27,050 | 28,060 | |||||||
| Equity: | |||||||||
| Stockholders' equity: | |||||||||
| Common stock | 158 | 157 | |||||||
| Capital in excess of par value | 26,734 | 26,690 | |||||||
| Accumulated deficit | (16,043 | ) | (16,540 | ) | |||||
| Accumulated other comprehensive loss | (456 | ) | (548 | ) | |||||
| Common stock held in treasury | (3,720 | ) | (3,708 | ) | |||||
| Total stockholders' equity | 6,673 | 6,051 | |||||||
| Noncontrolling interests | 3,320 | 3,206 | |||||||
| Total equity | 9,993 | 9,257 | |||||||
| Total liabilities and equity | $ | 37,043 | $ | 37,317 | |||||
| FREEPORT-McMoRan INC. | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||||
| Six Months Ended June 30, | |||||||||
| 2017 | 2016 | ||||||||
| (In Millions) | |||||||||
| Cash flow from operating activities: | |||||||||
| Net income (loss) | $ | 641 | $ | (4,511 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||
| Depreciation, depletion and amortization | 839 | 1,374 | |||||||
| Impairment of oil and gas properties | — | 4,078 | |||||||
| Non-cash drillship settlements/idle rig costs and other oil and gas adjustments | (33 | ) | 694 | ||||||
| Net gain on sales of assets | (33 | ) | (749 | ) | |||||
| Stock-based compensation | 44 | 42 | |||||||
| Net charges for environmental and asset retirement obligations, including accretion | 87 | 107 | |||||||
| Payments for environmental and asset retirement obligations | (59 | ) | (116 | ) | |||||
| Net loss (gain) on exchanges and early extinguishment of debt | 3 | (36 | ) | ||||||
| Deferred income taxes | 55 | 169 | |||||||
| (Gain) loss on disposal of discontinued operations | (38 | ) | 177 | ||||||
| Decrease (increase) in long-term mill and leach stockpiles | 80 | (99 | ) | ||||||
| Oil and gas contract settlement payments | (70 | ) | — | ||||||
| Other, net | (9 | ) | 18 | ||||||
| Changes in working capital and tax payments, excluding amounts from dispositions: | |||||||||
| Accounts receivable | 589 | 259 | |||||||
| Inventories | (101 | ) | 190 | ||||||
| Other current assets | (2 | ) | (53 | ) | |||||
| Accounts payable and accrued liabilities | (267 | ) | 44 | ||||||
| Accrued income taxes and changes in other tax payments | 103 | 26 | |||||||
| Net cash provided by operating activities | 1,829 | 1,614 | |||||||
| Cash flow from investing activities: | |||||||||
| Capital expenditures: | |||||||||
| North America copper mines | (67 | ) | (76 | ) | |||||
| South America | (45 | ) | (293 | ) | |||||
| Indonesia | (457 | ) | (453 | ) | |||||
| Molybdenum mines | (2 | ) | (1 | ) | |||||
| Other, including oil and gas operations | (135 | ) | (992 | ) | |||||
| Net proceeds from the sale of additional interest in Morenci | — | 996 | |||||||
| Net proceeds from sales of other assets | 4 | 290 | |||||||
| Other, net | (8 | ) | (6 | ) | |||||
| Net cash used in investing activities | (710 | ) | (535 | ) | |||||
| Cash flow from financing activities: | |||||||||
| Proceeds from debt | 598 | 2,811 | |||||||
| Repayments of debt | (1,242 | ) | (3,649 | ) | |||||
| Net proceeds from sale of common stock | — | 32 | |||||||
| Cash dividends paid: | |||||||||
| Common stock | (2 | ) | (5 | ) | |||||
| Noncontrolling interests | (39 | ) | (39 | ) | |||||
| Stock-based awards net payments | (8 | ) | (5 | ) | |||||
| Debt financing costs and other, net | (11 | ) | (18 | ) | |||||
| Net cash used in financing activities | (704 | ) | (873 | ) | |||||
| Net increase in cash and cash equivalents | 415 | 206 | |||||||
| Decrease (increase) in cash and cash equivalents in assets held for sale | 7 | (53 | ) | ||||||
| Cash and cash equivalents at beginning of year | 4,245 | 177 | |||||||
| Cash and cash equivalents at end of period | $ | 4,667 | $ | 330 | |||||
| FREEPORT-McMoRan INC. |
| ADJUSTED NET INCOME (LOSS) |
| Adjusted net income (loss) is intended to provide investors and others with information about FCX's recurring operating performance. This information differs from net income (loss) attributable to common stock determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. FCX's adjusted net income (loss) follows, which may not be comparable to similarly titled measures reported by other companies (in millions, except per share amounts). |
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||||||||||||
| Pre-tax | After-tax | Per Share | Pre-tax | After-tax | Per Share | ||||||||||||||||||||||||||
| Net income (loss) attributable to common stock | N/A | $ | 268 | $ | 0.18 | N/A | $ | (479 | ) | $ | (0.38 | ) | |||||||||||||||||||
| Mining charges: | |||||||||||||||||||||||||||||||
| PT-FI net charges for workforce reductions | $ | (87 | ) | a | $ | (46 | ) | $ | (0.03 | ) | $ | — | $ | — | $ | — | |||||||||||||||
| Inventory adjustments and asset impairment | (9 | ) | (9 | ) | (0.01 | ) | (2 | ) | (2 | ) | — | ||||||||||||||||||||
| Oil and gas charges: | |||||||||||||||||||||||||||||||
| Drillship settlement/idle rig credits (costs) | 6 | b | 6 | — | (639 | ) | (639 | ) | (0.50 | ) | |||||||||||||||||||||
| Inventory adjustments and asset impairment | — | — | — | (53 | ) | (53 | ) | (0.04 | ) | ||||||||||||||||||||||
| Other contract termination credits | 4 | 4 | — | — | — | — | |||||||||||||||||||||||||
| Restructuring charges | (4 | ) | (4 | ) | — | (37 | ) | (37 | ) | (0.03 | ) | ||||||||||||||||||||
| Impairment of oil and gas properties | — | — | — | (291 | ) | (291 | ) | (0.23 | ) | ||||||||||||||||||||||
| Net adjustments to environmental obligations and related litigation reserves | 30 | 30 | 0.02 | — | — | — | |||||||||||||||||||||||||
| Net gain on sales of assetsc | 10 | 10 | 0.01 | 749 | 744 | 0.59 | |||||||||||||||||||||||||
| Net (loss) gain on exchanges and early extinguishment of debt | (4 | ) | (4 | ) | — | 39 | 39 | 0.03 | |||||||||||||||||||||||
| Net tax credits (charges)d | N/A | 32 | 0.02 | N/A | (36 | ) | (0.03 | ) | |||||||||||||||||||||||
| Gain (loss) on discontinued operationse | 10 | 8 | — | (177 | ) | (177 | ) | (0.14 | ) | ||||||||||||||||||||||
| $ | (44 | ) | $ | 27 | $ | 0.01 | $ | (411 | ) | $ | (452 | ) | $ | (0.36 | ) | f | |||||||||||||||
| Adjusted net income (loss) attributable to common stock | N/A | $ | 241 | $ | 0.17 | N/A | $ | (27 | ) | $ | (0.02 | ) | |||||||||||||||||||
| a. Includes $82 million in production and delivery costs and $5 million in selling, general and administrative expenses. | |||||||||||||||||||||||||||||||
| b. Reflects adjustments to the fair value of the contingent payments related to the 2016 drillship settlements. The 12-month contingency period associated with the drillship settlements ended June 30, 2017, and no additional amounts were paid. | |||||||||||||||||||||||||||||||
| c. Net gains in second-quarter 2017 primarily reflect an adjustment of $13 million to assets held for sale, partly offset by a net charge of $2 million to adjust the estimated fair value of the potential $150 million in contingent consideration related to the December 2016 onshore California sale, which totaled $21 million at June 30, 2017, and in accordance with accounting guidelines, will continue to be adjusted through December 31, 2020. Second-quarter 2016 reflects gains associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and an interest in the Timok exploration project in Serbia. | |||||||||||||||||||||||||||||||
| d. Refer to “Income Taxes,” on page IX, for further discussion of net tax charges. | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
| e. The second-quarter 2017 gain primarily reflects an adjustment to the estimated fair value of the potential $120 million in contingent consideration related to the November 2016 sale of FCX’s interest in TFHL, which totaled $55 million at June 30, 2017, and in accordance with accounting guidelines, will continue to be adjusted through December 31, 2019. Second-quarter 2016 reflects the estimated loss on the sale of FCX’s interest in TFHL. | |||||||||||||||||||||||||||||||
| f. Per share amount does not foot down because of rounding. | |||||||||||||||||||||||||||||||
| FREEPORT-McMoRan INC. ADJUSTED NET INCOME (LOSS) (continued) | |||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||||||
| Pre-tax | After-tax | Per Share | Pre-tax | After-tax | Per Share | ||||||||||||||||||||
| Net income (loss) attributable to common stock | N/A | $ | 496 | $ | 0.34 | N/A | $ | (4,663 | ) | $ | (3.70 | ) | |||||||||||||
| Mining charges: | |||||||||||||||||||||||||
| PT-FI net charges for workforce reductions | $ | (108 | ) | a | $ | (57 | ) | $ | (0.04 | ) | $ | — | $ | — | $ | — | |||||||||
| Inventory adjustments and asset impairment | (28 | ) | (28 | ) | (0.02 | ) | (7 | ) | (7 | ) | (0.01 | ) | |||||||||||||
| Oil and gas charges: | |||||||||||||||||||||||||
| Drillship settlements/idle rig credits (costs) | 26 | b | 26 | 0.02 | (804 | ) | (804 | ) | (0.64 | ) | |||||||||||||||
| Inventory adjustments and asset impairment | — | — | — | (88 | ) | (88 | ) | (0.07 | ) | ||||||||||||||||
| Other contract termination charges | (17 | ) | (17 | ) | (0.01 | ) | — | — | — | ||||||||||||||||
| Restructuring charges | (5 | ) | (5 | ) | — | (39 | ) | (39 | ) | (0.03 | ) | ||||||||||||||
| Impairment of oil and gas properties | — | — | — | (4,078 | ) | (4,078 | ) | (3.24 | ) | ||||||||||||||||
| Net adjustments to environmental obligations and related litigation reserves | 11 | 11 | 0.01 | — | — | — | |||||||||||||||||||
| Net gain on sales of assetsc | 33 | 33 | 0.02 | 749 | 744 | 0.59 | |||||||||||||||||||
| Net (loss) gain on exchanges and early extinguishment of debt | (3 | ) | (3 | ) | — | 36 | 36 | 0.03 | |||||||||||||||||
| Net tax credits (charges)d | N/A | 31 | 0.02 | N/A | (36 | ) | (0.03 | ) | |||||||||||||||||
| Gain (loss) on discontinued operationse | 51 | 43 | 0.03 | (177 | ) | (177 | ) | (0.14 | ) | ||||||||||||||||
| $ | (40 | ) | $ | 34 | $ | 0.02 | f | $ | (4,408 | ) | $ | (4,449 | ) | $ | (3.53 | ) | f | ||||||||
| Adjusted net income (loss) attributable to common stock | N/A | $ | 462 | $ | 0.32 | N/A | $ | (214 | ) | $ | (0.17 | ) | |||||||||||||
| a. Includes $103 million in production and delivery costs and $5 million in selling, general and administrative expenses. | |||||||||||||||||||||||||
| b. Reflects adjustments to the fair value of the contingent payments related to the 2016 drillship settlements. The 12-month contingency period associated with the drillship settlements ended June 30, 2017, and no additional amounts were paid. | |||||||||||||||||||||||||
| c. Net gains for the first six months of 2017 primarily reflect adjustments of $32 million associated with oil and gas transactions and an adjustment of $13 million to assets held for sale, partly offset by a net charge of $12 million to adjust the estimated fair value of the potential $150 million in contingent consideration related to the December 2016 onshore California sale, which totaled $21 million at June 30, 2017, and in accordance with accounting guidelines, will continue to be adjusted through December 31, 2020. The first six months of 2016 reflects gains associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and an interest in the Timok exploration project in Serbia. | |||||||||||||||||||||||||
| d. Refer to “Income Taxes,” on page IX, for further discussion of net tax charges. | |||||||||||||||||||||||||
| e. The gain for the first six months of 2017 primarily reflects an adjustment to the estimated fair value of the potential $120 million in contingent consideration related to the November 2016 sale of FCX’s interest in TFHL, which totaled $55 million at June 30, 2017, and in accordance with accounting guidelines, will continue to be adjusted through December 31, 2019. The first six months of 2016 reflects the estimated loss on the sale of FCX’s interest in TFHL. | |||||||||||||||||||||||||
| f. Per share amount does not foot down because of rounding. | |||||||||||||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170725005750/en/
Contact
Freeport-McMoRan Inc.
Financial Contacts:
Kathleen L. Quirk, 602-366-8016
or
David P. Joint, 504-582-4203
or
Media Contact:
Eric E. Kinneberg, 602-366-7994
